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Thursday, August 4, 2016

I love analogs. I love the way they clearly lay out a very tradeable
path, slicing through all the noise and the head fakes. Our first was a
doozy, correctly forecasting the 21% Jul-Oct 2011 correction with
deadly accuracy [see HERE.]

Our most recent one, posted in Mar 2015, forecast the 12.5% correction that would occur almost five months later [see HERE.]

Although
I dislike day trading, it's become a necessary evil. Gone are the days
when a weak close practically guaranteed a weak opening the following
morning. It's just as likely, if not more so, to result in a gap
higher. Strong closes are almost as treacherous.

So, it's always fun when a new one appears on the horizon and we get a chance to take some longer-term positions.

First, let’s take a look at the REALLY big picture for the last 20 years.

Notice how SPX:

completed a backtest of the huge white channel midline in late 2014

reached the top of the rising red channel (within the white channel) in late 2014

reached the top of the rising purple channel in Feb 2015

despite reaching those channel lines, SPX continued rising to the yellow 1.618 (2138, actually reached 2134) in May 2015.

After reaching 2134 and tagging the top of the rising purple channel
again, SPX had all kinds of problems. But, the downside was contained
to the 1.272 extension at 1823.

In fact, 1823 has been backtested seven different times — including the time they failed to contain it on Jan 24, 2014 (it fell 85 points in 9 sessions, popped back up in 4.) The following times — Apr 11, 2014, Oct 15, 2014, Jan 20, 2016 and
Feb 11, 2016 — they held it to within 13 points.

Two things should be
quite obvious from this. First, having not cared one bit about 1823 as
resistance on the way up, they wanted to make damn sure it served as
solid support in the event of any declines (SPX should have
reversed strongly at 1823, as it completed a huge
Butterfly Pattern set up by the plunge from 1576 to 666 between 2007 and
2009.)

Second, it’s the clearest indication of market manipulation one could ever hope for. You simply don’t get severe intraday reversal of the sort that
occurred on those days without some heavy interference (Bullard hinting
at QE4, USDJPY spiking, oil futures doubling in price, etc.)

But,
none of that will come as a surprise to regular readers. We’ve
documented market manipulation on a regular basis for the past five
years. The reason I mention it is because it has a direct bearing on
what to expect from the “market” going forward.

Posting over here this morning as the website isn't yet quite right. Apparently some code got garbled in the transition. I'm on the phone with my hosting company, and it could take a while longer.

First, some charts I'm watching...

USDJPY has not recovered, but is merely bumping along after having seen its rising white channel and falling white channel both break down.

CL, on the other hand, is carrying the entire load of propping up stocks. It rallied over 5% off yesterday's lows -- which was a remarkable feat of manipulation even for CL. It came in the wake of a 1.4MM barrel build in inventory versus the 1.4MM barrel contraction that was expected.

This ramp took CL out of the falling channel it's been in since Jul 18 and back above the SMA200, which was music to the algos' ears. The algos don't care, of course, whether or not the rise was a manipulation (it was) or whether it would last (it shouldn't.) All they think they know is that oil is recovering, which is exactly what whoever manipulated it higher intended.

Our targets remain unchanged from yesterday. We have channel support for ES and SPX coming in right here.

Will it bounce? Keep an eye on CL. It's back below its SMA200 (40.77), and USDJPY is heading to the bottom of its rising white channel. So, it would appear that they're going to let the red channels fail sooner or later.

If you see CL suddenly spike above 40.77, you'll know it's going to be "later."

UPDATE: 11:07 AM

Will they or won't they? SPX is sitting at a deep retracement of this morning's initial plunge. Sure, it got there through nefarious means. But, that doesn't mean things can't get even more "nefarious-er."

If it's going to sell off some more, this is the time & place -- especially with the euro close coming up.

Wednesday, August 3, 2016

If you're reading this, you've probably figured out that pebblewriter.com is going through an upgrade. There's no great time to do this. I've actually been meaning to do it for several months, but -- Brexit, new all-time highs, BoJ, etc. -- no shortage of reasons to wait.

The changeover should make the site faster, and will accommodate some nifty features I've had in mind for a while. But, there could be some hiccups during the transition. If the site goes down any time during the next day or two while everything transfers over, I'll continue posting here.

about me...

I left Wall Street in August 2001 (95th floor of WT2, timing IS everything) and continue to trade for fun and profit. I hold undergrad degrees in Math and Econ, an MBA and am a CFA. Which is all to say -- I have no excuse for the miserable mistakes I often make.
This blog serves as a means to keep myself honest and my thoughts organized. It should not be construed as advice regarding any particular strategy or security.

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